Cryptocurrency 101 – Thinking of jumping in?

It has been hard to avoid hyperbolic news articles about the digital currency bitcoin and the enigmatic blockchain. These words conjure various emotions for many people – for some they are secretive technologies which are purposefully obscure and impenetrable. Many associate bitcoin with greed and hypercapitalism. It has just had a mega dip, fuelled by fear and uncertainty, yet it looks like a rebound is on the cards. Could it be the time to buy?

What is the blockchain?

Simple explanation: Invented in 2008. a block is a record of new transactions (which could mean money, but can also mean voting records, medical data and many more uses). Blockchain is decentralized, meaning that it does not rely on a single computer/server/organisation. Information on the blockchain is encrypted, and to process any transaction a complex math problems need to be solved using processing power. These problems become more difficult over time, this is “mining”. Once each block is completed it gets added to the chain, creating a chain of blocks – a blockchain, which is permanent and unalterable.

Now it sounds paradoxical given the focus on encryption, but blockchain is actually a public ledger – people won’t know your identity but the information from your transaction can be seen publicly. Therein lies the mantra “always trust the blockchain”.

Cryptocurrencies like bitcoin therefore use the blockchain so that monetary units can be encrypted and stored electronically within the network.

Can I get rich quick, or is this a dotcom/tulip bubble?

It is true that speculators have made this seem like a crazy market, but the fact remains that we are still in early days when it comes to cryptocurrency. The total market cap is still a tiny fraction of the Dotcom companies at the turn of the millenium. Bitcoin was The meteoric rise of Bitcoin towards the end of 2017 may not happen again for a while, or it may do. The truth is, who knows? But the blockchain is here to stay, and we are only just discovering some of its potential. Smart money would suggest that Bitcoin and the other “altcoins” (alternatives to bitcoin) remains a good investment, especially now that it has dipped.

How to get bitcoin?

The most well-established method of purchasing Bitcoin right now is by using the San Francisco based digital exchange Coinbase. Using this exchange, you can also buy other big altcoins, each of which has its own modus operandi. If you want to sign up, please feel free to use my referral link which will give both of us $10 of free bitcoin: https://www.coinbase.com/join/565648c1ea359f00da0001b4

What about hacks of bitcoin and cryptocurrencies?

Yes, there have been several high-profile hacks of exchanges in the news. The most notable was MtGox in 2014 when almost $450 million worth of bitcoin was stolen. Recently $500 million NEM coins was stolen from another Japanese exchange – Coincheck. Although the amount stolen is more, as the market is larger now, this has had less of an impact on cryptocurrency.

Nevertheless, people are understandably worried about the risk of hacking and stealing their hard-earned money.

Wallets

The solution is to keep the majority of your cryptocurrency in a wallet. When it is on an online exchange, you always run the risk of losing it to hacks. The safest bets are hard wallets such as the Ledger Nano S: https://www.ledgerwallet.com/r/6f42

Only you can access the wallet, assuming you don’t lose your password!

If a hard wallet is difficult to get hold of, then at the very least a software wallet should suffice. Exodus wallet provides the best option at present for your home computer or laptop: https://www.exodus.io/ ). You can also find mobile app wallets such as Coinomi, Enjin and Eidoo which store cryptocurrency, although remember to keep your passwords safe!

Trading Exchanges

But if you do want to trade between bitcoins and altcoins, hoping to find the “new bitcoin”, then make sure you keep your altcoins spread throughout different exchanges, not just in one. There are many exchanges, some of which are more mainstream and which have a solid infrastructure, and others which are more “badlands” territory, but where you can sometimes find bargains! These are the ones that I use, with referral links:

Binance is Chinese-owned and is a newer exchange, yet seems to be the most popular choice for new altcoins to be added at present. The infrastructure for both the online exchange and the mobile app is solid, and wallets for altcoins are well-maintained. They also promise to give you airdrops (free coins after a hard-fork) for bitcoin and other coins.

BITTREXhttps://bittrex.com – A safe bet for the largest spread of alts, however their infrastructure can become poor when volume is high. Wallets also take a lot of time to be updated, and also bittrex doesn’t give airdrops following hardforks. Nevertheless, it seems like a “safe bet” and the interface is easy to use.

More alternative exchanges:

These can be the place to find bargains or coins which have not yet reached the mainstream exchanges. Alternative exchanges can also be home to “deadcoins” – coins which have been long abandoned. Whilst this sounds like dodgy territory, sometimes these tiny coins can be pumped and dumped by groups on Whatsapp and Telegram. If you find yourself holding one of these coins, you can make a tidy profit if you cash out!

COINEXCHANGE – coinexchange.me.uk or https://www.coinexchange.io/?r=3de43825 This is the home of “pumping and dumping”. This is a practice which attracts greed but it is very risky, because you can be the one buying at the highest price! But if you hold a coin with a limit sell and others pump (and then dump) it, you can suddenly cash out with minimum work even if you don’t make as much as they do!

Future ones to look out for (exchanges will be online later in the year):
A number of new exchanges will be released over the coming months, which promise enhanced levels of security and smoother interfaces:

These exchanges are in early development, yet are promising because they appear to prioritise communication with the customer.

Mining

Mining is another way to make money from the cryptocurrency phenomenon. But that doesn’t have to mean setting up a maze of rigs and wires like the photo above. You can sign up for cloud mining websites which do the mining for you, once you pay for a contract for a certain period of mining. This way you can get a steady regular income without having to worry about your electricity bills. There are a number of scam mining companies to avoid, so please do your own research! The two biggest cloud mining sites at the moment are:

GENESIS MINING: https://www.genesis-mining.com/a/1473681 This is the largest cloud mining service and is easy to get started with, though their contracts do tend to be sold out a lot of the time! Feel free to use my affiliate code: hWN94y

Staking

Staking is an alternative to mining in some sense – all you need to do to earn with this method is hold coins in a desktop wallet, and the coins adopt a variable Proof of Stake(PoS) interest rate that gives a periodic payout. Be careful, as a lot of the coins which work with PoS have found their value going down, so although your holdings may increase, their net value may decrease. A lot of the coins which offer this are the smaller ones which you might only find on places like Coinexchange and Cryptopia, and you will need to download the specific wallet for that coin. Examples of PoS coins are PIVX, Netcoin, Reddcoin, Stratis, NEO, Dash, OKCash and Magi.

Good luck to you, and may you all get wealthy. Remember, wealth isn’t about having money, but having options, dreams and freedom. Don’t just dream of a lambo or island, but also giving money to something which means a lot to you.